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Greetings. Welcome to the La-

Thank you, Holly. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 first quarter. With us today are Melinda Whittington, La-

Thanks, Mark. Good morning, everyone. Yesterday, following the close of market, we reported results for our July ended first quarter. We delivered solid operational performance, consistent with the guidance range we issued last quarter, despite an uncertain macro environment and sluggish home furnishings market. Highlights for the quarter included, company-owned Retail written same-store sales growth of 2% versus year ago; consolidated delivered sales growth, up 16% versus our most recent pre-pandemic first quarter; record first quarter consolidated operating margin driven by our retail segment when compared to non-pandemic affected historical first quarters; non-GAAP EPS of $0.62; $18 million in capital returned to shareholders, including $10 million in share buybacks; and continued progress against our Century Vision growth strategy, including the expansion of our retail business with the opening of two new stores, completing the acquisition of two independent La-

Thank you, Melinda. Good morning, everyone. As a reminder, we present our results on both a GAAP and non-GAAP basis. We believe the non-GAAP presentation better reflects underlying operating trends and performance of the business. Non-GAAP results exclude items which are detailed in our press release and in the tables in the appendix section of our conference call slides. On a consolidated basis, fiscal ‘24 first quarter sales decreased 20% to $482 million versus the prior year quarter, reflecting lower delivered unit volume, partially offset by favorable product mix. As a reminder, we called out last quarter's conference call that fiscal ‘23 benefited by an approximately $300 million increase in delivered sales due to delivering the backlog of COVID related furniture orders, which will not repeat this year. Specifically, last year's first quarter was a first quarter historical record sales period due to this backlog supported production and delivery. Importantly, this first quarter was 16% higher than any previous non-pandemic first quarter. Consolidated GAAP operating income decreased to $35 million and non-GAAP operating income was $34 million, a decrease of 37% versus last year's first quarter. This year's first quarter result is the highest level of non-GAAP profit in any non-pandemic first quarter. Consolidated GAAP operating margin was 7.2%, and non-GAAP operating margin was 7%, reflecting a 190 basis point decline versus last year and also the best non-GAAP operating margin in any non-pandemic first quarter. GAAP diluted EPS was $0.63 for the first quarter versus $0.89 in the prior year quarter. Non-GAAP diluted EPS was $0.62 in the current year quarter versus $0.91 in last year. As I move to the segment discussion, my comments from here will focus on our non-GAAP reporting unless specifically stated otherwise. Starting with the Retail segment for the quarter, delivered sales were $208 million, a 12% decrease over the prior year's first quarter, which benefited from high deliveries of backlog. Importantly, sales were 46% higher than our fiscal ’20 first quarter, a 10% CAGR improvement over the past four years. Retail non-GAAP operating margin decreased to 14.1% versus 16.2% in the prior year quarter, driven primarily by fixed cost deleverage on the lower delivered sales volume. This operating margin was 810 basis points higher than the fiscal 2020 first quarter’s pre-pandemic result, reflecting significant in-store execution improvement and fixed cost leverage due to the overall growth of the retail business. For our Wholesale segment, delivered sales for the quarter declined to $333 million, a 25% decrease versus the prior year period, which benefited from pandemic backlog production and deliveries. The decrease was primarily due to lower delivered unit volume, as the backlog returned to pre-pandemic levels, but partially offset by a favorable mix in product. Non-GAAP operating margin for the Wholesale segment was 6.8% versus 6.1% in last year’s first quarter, reflecting strong gross margin performance, partially offset by SG&A deleverage on lower sales. Gross margin expansion was driven by favorable product mix and raw material cost reductions, partially offset by foreign exchange headwinds due to the strengthening Mexican peso. Given the recent strength in the peso, which is at its strongest level seen in over five years, it’s costing us more to fund our Mexican operations, and this was a $2 million drag to margins in the quarter. It's important to call off that our supply chain team delivered this gross margin improvement, even with the headwinds of significantly reduced volume, post backlog delivery. Joybird, which is reported in Corporate and Other, recorded delivered sales of $36 million, a 17% decrease versus the prior year quarter. The decline was driven by lower unit volume from more cautious online consumer demand. Importantly, we began to make progress on improving gross margin in the quarter, allowing us to narrow our losses versus the back half of last fiscal year as we work to balance growth and profitability. Pulling all of this together for the quarter, consolidated non-GAAP gross margin improved by 430 basis points versus the prior year first quarter, primarily due to, one, segment mix with a higher percentage of sales from retail, which carries a higher gross margin, two, a more profitable product mix, and three, lower material costs. As a reminder and included in our 10-Q, we have reclassified distribution center expenses from SG&A into cost of sales to more appropriately align with peers in the industry and align with how management internally manages supply chain costs. This reclassification has no impact on consolidated and segment sales and operating margins. A table summarizing the impact of this reclassification on previously disclosed results is included along with the Q1 earnings press release on Form 8-K. Total dollar spent on consolidated non-GAAP SG&A decreased versus a year ago but non-GAAP SG&A as a percentage of sales for the first quarter increased by 620 basis points, primarily due to sales deleverage across -- against last year's backlog aided top-line results as well as segment mix with a higher percentage of sales from retail, which carries higher fixed costs. Our effective tax rate on a GAAP basis for the first quarter was 26.5%, the same as the prior year period. Our effective tax rate varies from the 21% Federal statutory rate, primarily due to state taxes. We expect our effective tax rate to be in the range of 26% to 27% for fiscal 2024. Turning to cash. For the quarter, we generated $26 million in cash from operating activities. Solid cash generation in the quarter was driven by profit performance, a decrease in receivables in line with the lower sales and continued progress in reducing inventories. This was partially offset by a decrease in liabilities due to lower customer deposits and paying out our annual incentive compensation awards in the quarter. We ended the first quarter with $340 million in cash and no debt. We spent $13 million in capital expenditures during the quarter, primarily related to retail store openings and remodels and upgrades to our manufacturing and distribution facilities. We also spent $4 million on the acquisition of two independent La-

Thanks, Bob. With many initiatives coalescing in the quarter, including our new brand campaign launch, I'm more excited than ever about the future of La-

Thank you, Melinda. We will begin the question-and-answer period now. Holly, please review the instructions for getting in the queue to ask questions.

Certainly. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is coming from Bobby Griffin at Raymond James.

Good morning, everybody. Thanks for taking my questions. Hope everybody's doing well.

Good morning.

Hi, Bobby.

I guess first, maybe a long-term question, I'll go in reverse and ask you a few long-term questions before the short-term ones, but maybe on the path to 400 Galleries, those of us that have been around the La-

Thanks for that clarification question, Bobby. Yeah, so many years ago, we were talking about a 400 store target. And we stopped short of that. At that time, if you go back five years or so, we were pretty pleased with our retail operations started delivering kind of a mid-single digit margins. And so what we found, as you noted, is that at that kind of an operational level, when we looked at the opportunities for storage expansion, we ran into geographies that just didn't make sense. So two things have changed. One, that landscape continues to evolve. And more importantly, our execution in retail has just significantly strengthened. As you know, now we're consistently more in the mid double digit margins, and that reflects pretty much execution at every level. That's even on what's been some tougher traffic trends, our conversion rates, our average ticket, our use of design sales just continue to strengthen. So we believe in what we can do, and that begins to open up some opportunities in other markets. So I mean, that's kind of what gets us back on that. When we look at the consumers that we can serve, even at the similar footprint to what we have today, we see consumers that need served in another 50 markets. And then as you know, there's additional opportunity there, and we'll take things a step at a time. But that's why we're starting to test some alternate formats even with our couple of outlet stores and just start to look at where else do we help meet the consumer where he or she wants to shop.

Okay. That's helpful. And then maybe another long-term focus one, but, Bob, just on understanding that -- the double digit margins, a long term target, and I appreciate that it's out there because it gives something to kind of grade and build on, what is the pathway to build from kind of where the business is today? And we only have one quarter here and we're lapping backlog and seasonality wise, this is usually a lower margin quarter. But if you just kind of think if we're running 7%, 8% today, the path to kind of build to 10%, kind of what is needed to go to kind of get there from a volume standpoint or pricing or anything else inside the model to help us to think about that.

There's three things, Bobby. First thing is Retail, and that's growing that business to that 400 store level that we're talking about and getting ourselves into a consistent, middle teams operating margin. The second one is the Wholesale business and getting it back to a 10% operating margin. Pre-pandemic, we were operating at around 10% in that business for a number of years in a row. We're below that now. We expect over the next two to three years, we'll be getting back to that 10% with a lot of work we're doing with our supply chain, and how we're managing manufacturing throughout the company. And the third piece is just getting Joybird back into the profit zone. And a combination of those three things will get us squarely into consistent double digits.

Okay. That's helpful. And then maybe more near-term wise, there's been a lot of talk and throughout the furniture industry, we're starting to see transportation costs obviously come down. We've started to see some pricing reductions. Just can you maybe talk about what you're seeing competitively in terms of pricing, is industry holding on to some of the pricing that we've put through over the last 18 to 24 months?

The industry continues to hold on to, I would say, the bulk of that pricing. There have been reductions that we've seen across a number of customers and a number of channels and a little bit more on the case goods side of the business, which was impacted more by those really high ocean freights. The overland freights in the US is not getting any better. The trucking business is still a little bit firm from a pricing perspective. We have taken -- and we've mentioned this before in previous calls, we've taken some pricing on some of our opening price points products to make sure that we remain competitive in those areas and that we're protecting our floor space. But broadly speaking, things are still -- the major -- I would say the majority of that pricing has stuck.

Okay. That’s helpful. I appreciate it. I’ll jump back in the queue. But best of luck here on the next quarter.

Thank you.

Thanks, Bobby.

Your next question is coming from Brad Thomas with KeyBanc Capital.

Hey, good morning, everybody. Thanks for taking my question and congrats on a nice quarter and some nice order growth here.

Thank you.

Melinda, I guess the demand side of things is I was hoping to maybe first ask about certainly some encouraging written trends that you're seeing. I believe, Bob, you mentioned the lower unit volume and a better mix. Melinda, I was hoping you could just talk a little bit more about that composition of what you're seeing in terms of sales. Any nuances in terms of the kind of customers' demographics that you're seeing because I do think it does stand out versus what we're seeing across the industry? And then maybe, Melinda, if you could also add on a little bit more about what you're hearing from your independent retail partners in terms of demand trends and inventory levels that they have in their stores and in their systems.

Certainly. So a couple of things. As we all know here, delivered numbers are going to look unusual this year because of the $300 million of backlog we were still delivering last year. It was all from all the pandemic disruption, right? So to your point, we're really focusing on those trends of what we're writing. The consumer around across the market, across the furniture industry is certainly appearing to be challenged. I think -- we are very pleased across all of our furniture galleries with the demand that we're seeing and that we are writing positive on a base that is significantly bigger than where we were pre-pandemic. And so exactly to that point, we're up 2% even versus a year ago for our company-owned retail. Importantly, our entire Furniture Galleries network is also up 2%. And so I think that speaks to the strength of the brand and the strength of the execution. Our consumer is a more upper middle-class consumer. So perhaps maybe a little less impacted by some of the economic challenges that are out there, and that may be part of what's playing there. But I think, again, we are unique and that we have the power of a brand, and we should see that even strengthen more with our new ad campaign and continuing to really invest in our brand and our product over time. To your one other question there, that 2% growth for our company retail, there was a little bit of benefit there from -- I'll call it pricing, but it's really mix because there's been no significant pricing actions across our overall portfolio. But that's on stable units versus a year ago. So we're pleased with that as well.

That's great. And let's see here. To follow up on Bobby's question, just as we think about the margin outlook here. I was wondering if you all could maybe talk about some of those puts and takes as we think about the balance of the year for gross margin in particular.

We don't -- I’m generally -- just we're not giving specific guidance on the components of the P&L. We will continue to do the work that we've been focused against over the last couple of years on Century Vision, that's improving our supply chain. Our margin going forward from a gross margin perspective, we'll continue to improve as retail is a larger part of our business, and that carries with it a higher gross margin. Importantly, from an overall margin perspective, we are increasing -- and I mentioned it in the prepared remarks as well as in the press release that we are going to invest more heavily from a marketing perspective than what we did in the prior year to support the Long Live with Lazy campaign. The work that went into getting the consumer insight and the segmentation work and the development of that campaign. We really want to leverage that because we think that's going to really benefit us, particularly on the -- from a written sales and a demand perspective going forward. So that will be -- while we're going to be making improvements from a gross margin perspective, SG&A will continue to move up quarter-over-quarter as we invest against that marketing.

That's helpful, Bob. I know you don't want to get it specifically. I appreciate the details there. If I could squeeze one last one in, just on Joybird. I know that driving better profitability there has been a big focal point for you all. And it looks like the revenue is sequentially pretty similar to what you did last quarter. Can you talk a little bit more about the path to better profitability for Joybird and when do you think you hit the point where you can maybe push a little bit more on driving some growth there again?

Yeah. A couple of things on Joybird. The entire e-com furniture industry, certainly last summer, kind of dramatically slowed down. And it seems like maybe in general, furniture consumers sort of hit that saturation point of who's going to want to purchase online and who's going to want to purchase in-store. And there's still -- the majority of consumers does more in-store. So that is a known. And what we're excited about with Joybird first of all, is that it is an e-commerce brand, so it can benefit from that market for that consumer that's interested. But we also have a network of stores. And so we believe that combination is a good positive for the longer term for Joybird, and we'll continue to invest across both of those channels and really create that true omnichannel presence where the consumer can start online and move into store or vice versa. The pure e-commerce players don't necessarily have that benefit. The second thing we have is a vertically integrated model where we're making that furniture, and that gives us the capability to invest in the brand and continue to make it grow over time. As far as -- we certainly have taken a pause on that, as you know, to make sure it was early last summer when the majority of e-comm players really saw the slowdown. For Joybird, that didn't happen until Labor Day last year. And so that will be behind us in our base by the time we finish our second quarter. And with the progress we're making on bottom line, we're excited to see that start to start to move into more of a growth mode here. I'm not going to call it specifically, but I think we're getting closer.

That’s great. Thanks so much. I’ll turn it over to Holly.

Thank you.

Your next question for today is coming from Anthony Lebiedzinski with Sidoti & Company.

Good morning and thank you for taking the questions. Would like to…

Good morning, Anthony.

Yeah, good morning. I would like to hear your perspective on just the overall inventory levels at your wholesale customers. So a year ago, there seemed to be a glut of inventory out there at the retail level. So just curious to get your thoughts as to like where are inventory levels now? Or do you think they're more balanced and just overall would like to hear your thoughts on that?

Anthony, they're more balanced than they were last year for sure because last year was -- there was just a lot of ordering that wasn't happening. The -- at our -- what we'll call our major accounts or our larger customers, they're pretty much back to where they expect to be. Our Furniture Galleries -- our independent Furniture Galleries are also back to the inventory levels that they expect to be. Where we're still seeing some issues, if you will, with a little bit slower ordering due to inventory still being brought back down or with some of the general dealers, the smaller general dealers that we deal with.

All right. Thank you for that. And then I thought the partnership that you talked about with Rooms to Go sounded interesting. Is this the first of its kind that you have out there? Or is it like -- just curious to get your perspective on how this came about and whether you'd be open to doing other similar type partnerships?

Historically, half our sales are coming from general dealer types, right, non-furniture galleries of what we're making, it's selling to non-furniture gallery type customers. And so it's not new, right, to have a broad channel strategy and what we know in a highly fragmented furniture market, -- there are -- we would have as many consumers as we can come into our furniture galleries because that's where we believe we can give them the best full brand experience. But we also recognize that we have consumers that are never going to walk into a furniture gallery. And so we're looking -- we have been always looking for the right partners that can attract a different consumer that might not ever walk in. What we love about and when we called out Rooms to Go, what is a bit unique about it is it's a larger account, larger than some we've opened up in a while. And it's unique in that it is an extremely narrow band of product around recliners where Rooms to Go was looking at really going into that space and wanted to partner with us to have the best of the best in the recliner space and really focus on a consumer that otherwise wouldn't be in store. So we'll always look for that broader channel strategy and managing the conflict so that the right consumers are going into our furniture galleries, but this is just a great example of catching a broader base.

Got it. Okay. Thanks for the clarification, Melinda. Definitely appreciate it. All right, well, that’s all I had. Thank you very much and best of luck.

Thank you.

Thank you, Anthony.

We have reached the end of the question-and-answer session. And I will now turn the call over to Mark for closing remarks.

Thanks, everyone. Melinda, Bob and I will be in our offices today to take any questions that we didn't get into on the call. Thanks, and have a great day.